SEBI panel plans more derivative products

By Our Staff Correspondent

MUMBAI, JULY 16. The Technical Group set up by the Securities and Exchange Board of India (SEBI) to identify new derivative products had its first meeting. The group is headed by Prof. J. R. Varma, board member, SEBI.

The group made note of the trading volumes in the index futures contracts at both NSE and BSE. It is felt that the volumes in index futures contracts will improve with the participation by institutions and mutual funds which are in the process of seeking internal approvals and setting up their own systems. As regards FIIs, procedural clarifications regarding inflow and outflow of foreign exchange for derivative trading are awaited from the Reserve Bank of India.

The group, after deliberation, was of the view that preparatory work for the introduction of other derivative products should begin. These would include options on indices, covered warrants and options on individual stocks. Risk containment measures for these products would be laid down by the SEBI in about six weeks. The exchanges were of the view that they would take about 3-4 months for development of software and other infrastructure and these products could be introduced latest by the end of this year.

The group also felt that the exchange traded derivative product on interest rate and foreign currencies should also be introduced in the market. Since this concerns RBI, the SEBI would take up the issue with the RBI and suitable products would be identified with mutual consultation.

The group was of the view that there is need for education on derivatives for investors as well as market participants. It has been decided that the BSE, NSE and ICICI along with SEBI jointly conduct investor education programmes through seminars, workshops, circulation of literature on Internet, CD-ROMs and in printed form.

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Section  : Business
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